The new minimum wage covers more than 250,000 current employees and 100,000 seasonal holiday employees. The new salary increase will also cover part-time and temporary workers hired by agencies.
“We listened to our critics, thought hard about what we wanted to do, and decided we want to lead,” said Jeff Bezos, Amazon’s chief executive, in a statement.
Amazon’s current hourly wages vary. According to a survey of job postings, starting pay for such workers can be as low as $10 an hour or as high as $14.
An Amazon spokesman declined to provide its current average starting pay in the U.S. In April, an Amazon spokeswoman told The Wall Street Journal it had been paying its full-time U.S. warehouse workers an average hourly wage of more than $15, though that included stock and incentive bonuses.
Previously, Amazon’s starting wages have ranged based on where workers are located. For example, a current job posting for a full-time warehouse worker in Omaha, Neb., starts at $12.25 an hour, while a similar job in Madison, Wis., starts at $11. Part-time workers doing customer service from home start at $10 an hour.
Bottom Line Profits
A 50-cent raise an hour across 250,000 employees, for example, would imply a post-tax impact on operating profit of roughly $200 million, or 1% or 2%, according to Colin Sebastian, an analyst with Robert W. Baird & Co.
Amazon’s wage increase may cause some financial pressure over the next year and a half, said Youssef Squali, internet analyst with SunTrust Robinson Humphrey Inc. But Amazon has never been about profitability, “it’s historically been about growth, growth, growth,” he added.
Amazon has already been in the crosshairs of the White House when it comes to threats of antitrust investigations, and while some say this is simply Trumpian bluster that has a slim chance of going anywhere, some new numbers out from the researchers at eMarketer could prove to be a fan to the flames.
Amazon is set to clear $258.22 billion in US retail sales in 2018, according to eMarketer’s figures, which will work out to 49.1 percent of all online retail spend in the country, and 5 percent of all retail sales.
It started as an online bookstore, but today Amazon is a behemoth in all areas of e-commerce, fuelled by a strong Marketplace network of third-party sellers, an ever-expanding range of goods from groceries to fashion, and a very popular loyalty program in the form of Prime.
Now, it is fast approaching a tipping point where more people will be spending money online with Amazon, than with all other retailers — combined.
10% Share of All Retail in 2 Years
Shot Heard Round the World
Minimum Wage Lobbying
So that competitors do not have a wage advantage, Amazon will lobby Congress for an increase in the federal minimum wage, currently $7.25 an hour.
Many retailers are already struggling. JC Penny is on the bankruptcy ropes.
What's Going On?
Is this a calculated ploy by Bezos to further pressure the competition or is Bezos simply paying more because Amazon struggles to hire competent workers? Is fear of Trump in play?
One thing's for sure: Bezos expects to gain something out of this. That is not a bad thing, just a statement of fact.
Here's a second sure thing: Pressure will be immense on other retailers to follow.
Mike "Mish" Shedlock